Polish Financials: Will they finally take the plunge? (PZU and Bank Pekao stay BUY, Alior Bank upgraded to BUY)
In this report, we present our updated views on the PZU group. We rate all three companies as BUYs. At PZU, we see the valuation as particularly appealing as, on our 2021E P/E, it trades at 8.1x and, at this valuation juncture, the share price usually rebounds. On top of this, we believe the dividend should return next year and, last but not least, the potential merger could serve as a catalyst, should a decision be made. Pekao is our long-term top pick of the three, as we believe that the merger, if executed properly, can add value and enhance the bank’s ROE in the medium term. The market seems to be ignoring this factor completely, as Pekao trades at 0.5x BV. We see Alior Bank’s current valuation as particularly attractive from Pekao’s perspective. Our positive rating on Alior Bank stems purely from the potential acquisition premium that we add on top of its stand-alone valuation, which would yield only a neutral stance. However, this upside, should the potential merger materialise, offers an attractive risk reward profile. We would remain positive on PZU and Bank Pekao, even if the merger does not materialise, but we admit that we would see it as a negative turnout. Our positive stance on both stems from their deeply discounted valuations and dividend potential, and, at Bank Pekao, we see its share price performance as severely reduced, along with the other FX mortgage exposed banks, while it has only immaterial exposure.Alior Bank is a universal lending and deposit-taking bank which renders services to individuals, legal persons and other entities which are Polish and foreign persons. Co.'s core activities include maintaining bank accounts, granting loans and advances, issuing banking securities and purchasing and selling foreign currency. Co. also conducts brokerage activities, consulting and financial agency services and renders other financial services.
Bank Polska Kasa Opieki (the Bank) is a commercial bank providing a range of banking services, mainly in Poland. The segments of the Bank are as follows: Retail banking, which comprises all banking activities related to retail customers and small and micro companies; Private banking, which comprises all banking activities related to the affluent individual customers; Corporate and Investment banking, which comprises all banking activities related to the companies, interbank market, debt securities and other instruments; and Assets and Liabilities Management and other, which is engaged in the supervision and monitoring of fund transfers, and other activities centrally managed.
Powszechny Zaklad Ubezpieczen is an insurance group based in Poland. Co. is engaged in offering a broad range of insurance and financial products. Co. pursues three main lines of business: Property and Casualty Insurance, offered by PZU; Life Insurance, offered by PZU Zycie; and Open-end Pension Funds, offered by PTE PZU, the manager of OFE PZU Zlota Jesien. Co. maintains a network of sales and service outlets including 500 outlets throughout Poland, including 243 shared outlets (common for PZU and PZU Zycie), 137 outlets of PZU Zycie and 120 outlets of PZU. Co.'s business is focused on the Polish market but it also conducts insurance business in the Lithuanian and Ukrainian markets.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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